The Welfare Effects of Imperfect Harmonization of Trade and Industrial Policy
No hay miniatura disponible
Fecha
Autores
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
Partial cooperation in setting trade policy may be worse than no cooperation for countries who form a customs union. The paper investigates three situations where this is likely to occur. First, if the countries forming the union comprise too small a percentage of the non-competitive sector of the industry, their cooperation may be disadvantageous for essentially the same reason that a merger may be disadvantageous in oligopolistic industries. Second, even if the countries forming the union comprise the entire non-competitive sector of industry, cooperation on trade policy may be
disadvantageous if industrial policy (e.g. investment subsidies) are chosen non-cooperatively. The reason is that cooperation in trade policy may exacerbate the inefficiencies created by non-cooperation at an earlier stage. Third, cooperation in choosing trade policies may
encourage excessive investment by competitive importers and thus reduce the demand faced by the oligopolists.